When Malaysians woke up on May 10, the world looked and felt different. For the first time in years, many Malaysians feel a sense of optimism that was missing in their lives. For the past six decades, Malaysians have been living under the rule of the United Malays National Organisation (UMNO).
UMNO had won every election since 1955. In the May 9 general elections, Najib Razak, UMNO’s leader and prime minister, was not only confident, he was telling close aides that he was aiming for two-thirds of the seats in the 222-seat parliament. By the time the final vote was counted, UMNO had only 79 seats and lost power.
What happened? This will be the question preoccupying political scientists for years to come.
Suffice to say, Najib lost due to three main reasons.
First, his personal brand had become synonymous with kleptocracy. He was alleged to have received close to US$1 billion from a Malaysian sovereign fund via complex international transactions. It did not help that Najib’s wife, Rosman Mansor, was widely regarded as a spendthrift with a passion for diamonds and designer bags.
Second, Dr Mahathir Mohamad was no ordinary opponent. Mahathir was Malaysia’s longest-serving prime minister, from 1981 to 2003, and had come out of retirement to fight Najib.
Third, and perhaps most important, UMNO was simply seen as an organisation for political patronage, and a purveyor of racism and crony capitalism. It was no longer seen as a Malay nationalist party. In the past few decades, UMNO has been regarded as vehicle for making big money, government corruption and spreading hate towards the Chinese community in Malaysia.
The rural Malays, the mainstay of UMNO political power, could not stomach Najib’s toxic reputation as “Mr Kleptocrat”. They could see that under continued UMNO rule, their lives would be economically ruined. The GST brought in by the Najib administration was the last straw. Prices of basic necessities went up across the board despite Najib’s insistence that the GST would bring down prices.
There is tremendous goodwill towards Mahathir. Yes, he was dictatorial when he was prime minister the first time around. But most Malaysians I spoke to say this time it will be different. Mahathir is 92, and it is obvious he is a transitional leader.
He has said many times that once his jailed former deputy, Anwar Ibrahim, can get a royal pardon and a seat in parliament, he will hand over power to Anwar. Many Malaysians believe he will keep his word: after all, he cannot be going for re-election when he is 98.
Mahathir will also be constrained by the opposition’s organisational structure. His party, Pribumi Bersatu, has the third-smallest number of MPs of the four parties in Pakatan Harapan (PH) (Alliance of Hope). He is not in a position to bully.
Finally, what will happen to Najib Razak? Will he go to jail for 1MDB and the missing billions? In the short term, the answer is “no”. The new government will not immediately arrest Najib, or his wife. It will instead likely establish a committee to look into the 1MDB affair and get a definitive answer as to where the US$5billion disappeared to.
If the investigation panel shows Najib is behind the scam, then, yes, Najib will probably end up in jail. But this is a long process. It is more likely that any prosecution against Najib will start outside Malaysia.
Several governments, notably the US, are interested in sorting out the 1MBD issue. Thus far they could not complete their investigations because Najib used his position to stop Malaysian institutions from cooperating with the US Department of Justice probe into 1MDB.
There is a potential new angle to 1MDB, which is related to Australia. The bank account Najib used to launder 1MDB’s money is actually part-owned by ANZ Australia. Many believe some of the money from 1MDB passed through the Australian financial system.
For the last year, the people of Timor-Leste have expected – and received – little from their government except deadlock.
From a political standpoint, there’s been gridlock for nearly a year after the Fretilin party eked out a victory in parliamentary elections last July, kicking independence hero Xanana Gusmao’s National Congress for Timorese Reconstruction (CNRT) party out of power for the first time in a decade.
However, Fretilin’s minority government found itself blocked at every turn by CNRT and its allies. It finally collapsed in December, forcing the beleaguered president to call for new elections, to be held on Saturday.
At the same time, there’s been economic deadlock, as well. The vast riches of the oil and gas fields in the Timor Sea have been locked away due to Timor-Leste’s seemingly intractable negotiations with the Australian government over a disputed maritime boundary.
In March, a boundary treaty was finally signed between the countries, which could lead to billions in royalties for Timor-Leste. But disagreements remain on how to develop the untapped Greater Sunrise basin that lies across this boundary.
In the past, Timor-Leste governments have focused on a “big development” economic strategy to exploit the country’s limited fossil fuels, which José Ramos Horta, the Noble Peace Prize laureate and former president and prime minister, has called “an absolute necessity for the future well-being of this country”.
The recent political impasse has put serious discussions about the future of the country on hold. For starters, the tenor in the run-up to the election has been acrimonious and personal, with the leaders of each party trading insults and playing up their contributions to the war of independence against Indonesia instead of debating policy.
Candidates have focused their campaigns on voting for the best “fatherly” figure of the revolution, with little regard for the country’s youth, who suffer from high unemployment rates and have largely been marginalised from the political process.
The economic development of the country, meanwhile, has been left out of the debate. The candidates all stress the need for “big resource development” and the need to build massively expensive gas processing infrastructure on the south coast of the country. But what’s lacking is any indication of whether gas can (or will) be developed in the long term by any multinational gas producer.
Also lacking is any real discussion about the future of the economy and how best to wean the country off its reliance on fossil fuels to drive economic growth. This has long been seen as a risky and unsustainable strategy.
Based on my own research in the country, as well as the work of other academics and development experts, the new Timor-Leste government will need to take a different strategy more in line with the [United Nations’ Sustainable Development Goals], encouraging private investment and developing non-oil exports in agriculture, community forestry and coffee exports. Timor-Leste has committed itself to these SDGs, even if it is struggling to meet them.
According to tradition, a sacred house in Timor-Leste is formed by four pillars. If two of those pillars are in a sloping position or broken, it will impact the house as a whole. When that happens, the elders will ask the young people to find new pillars to replace the ones that are damaged.
Timor-Leste now finds itself with two broken pillars – the leadership of the country and the dysfunctional parliament. The situation requires the attention of all Timorese to help fix the broken pillars and right the country.
The big question is whether the politicians who are elected on Saturday will listen to the people and bring an end to the deadlock holding the country back.
I would like to acknowledge the contribution made to my article by Victor Soares, Lecturer in Public Policy, Universidade Nacional Timor Lorosa’e (UNTL), Dili
The $41 million over four years is about the minimum viable amount to start towards these goals. Sensibly spent, it is enough to achieve the core aims of an Australian agency.
International credibility for Australian space: Australian space businesses bidding for international work dread the question “why doesn’t Australia have an agency?” as it’s often the prelude to “without an agency it’s just too risky for us to work together”. A funded agency takes this objection off the table and levels the playing field.
Support for Australian business: Early-stage grants to help businesses prove concepts – for example, to build a launch-ready small satellite – are within the means of this budget. This will help Australian startups cross the “valley of death” from concept to export-ready, space-tested hardware.
Federal and international coordination: A mix of state and federal agencies have a hand in civilian space activities; a funded agency will help impose order domestically and serve as a focal point for international engagement with other space agencies.
Long term strategic planning for the sector: Space is a long lead-time business. The agency will be responsible for strategic planning for the sector. The money will give its plans clout and an ability to nudge startups and universities into growth areas through funding allocations.
This is not the sort of funding for an agency that will be hiring engineers and building its own spacecraft. Most of the money will be spent in partnerships with commercial companies and universities to help get new ideas and good companies off the ground.
Some will be spent with international agencies to give Australia a “seat at the table” and a chance to bid for international contracts. These partnerships are the likely role of the $15 million earmarked for space investment.
The budget is light on detail and there are many unanswered questions, including:
what areas will Australia focus on?
where will key parts of the agency be located?
what will the future of the agency look like after the four years?
I look forward to seeing these details in the near future.
Anika Gauja, Associate Professor, Department of Government and International Relations, University of Sydney
With income tax cuts and a return to surplus earlier than expected, Treasurer Scott Morrison has certainly delivered a budget full of pre-election sweeteners. New South Wales itself isn’t a big winner, however, with only A$1.5 billion of the A$24 billion earmarked for infrastructure projects heading its way.
The projects that have been announced are strategically targeted: A$400 million will be spent on upgrading the Port Botany rail link, and A$50 million will go towards investigating the business case for the proposed Badgery’s Creek airport rail. The Pacific Highway will be upgraded with a new A$1 billion bypass at Coffs Harbour, bringing a windfall to the Nationals-held seat of Cowper. Scott Morrison’s own electorate will get A$25 million for a new monument commemorating the 250th anniversary of Captain Cook’s landing.
The “election budget” takes on even more significance in NSW, where voters will most likely go to the polls twice in the coming 12 months, with the next state election due in March 2019. By allocating only a modest proportion of infrastructure funding to NSW, the federal Coalition has made it hard for its NSW counterpart to capitalise on spending announcements during the state campaign.
If the state election is held before the next federal election, this might indicate confidence that Gladys Berejiklian’s government will be returned. Yet it might also signal a strategic focus away from NSW, where the state election could act as a buffer to absorb some of the disaffection that might otherwise be directed at the federal government.
David Hayward, Professor of Public Policy and Director, VCOSS-RMIT Future Social Service Institute, RMIT University
Victoria is one of the big winners from the budget, through a mixture of luck and good political management.
First the luck. Mainly due to higher-than-expected population growth, Victoria will receive a bigger share of the national Goods and Services Tax pool, with revenue growing by a whopping A$1.4 billion, or almost 10% to A$17.3 billion. For the first time, Victoria’s share of GST revenues will be almost the same as its share of Australia’s population.
Also growing rapidly is the state’s share of federal infrastructure spending, which is tipped to rise from barely 8% to 15%. This is where the good political management part comes in. Over the last three years, Premier Daniel Andrews and Treasurer Tim Pallas have hit the airwaves to great effect, complaining bitterly about the state’s low levels of infrastructure investment under the Turnbull government.
With an election only six months away, the federal government has finally responded with a cool A$7.6 billion in total. Most of that investment will flow into a Melbourne Airport rail link (A$5 billion), a North East toll road that is yet to gain the support of the opposition (A$1.75 billion), and a rail link to Monash University’s Clayton Campus (A$500 million).
Much of this money won’t be seen for many years, with the spend next year being just A$900 million. The airport rail link is unlikely to start being built until 2026. There will also be some wrangling well before then, with the federal government determined to “equity” fund and the Victorian government looking for good old-fashioned capital grants.
Overall, though, this is a good-news budget for Victorians and the Victorian government. Just don’t expect opposition leader Matthew Guy to be smiling.
Ian Cook, Senior Lecturer in Australian Politics, Murdoch University
Today the budget confirmed that the West Australian government would get another A$2.8 billion to spend on transport infrastructure, and A$189 million to spend on hospitals. Low- to middle-income earners in WA, like everyone else in the country, can now expect around A$500 back by way of an increased tax rebate. West Australians were told last week that they would get around A$1 billion more through a revised GST carve-up.
The crucial question now is whether Western Australians will see the federal government’s budget and the GST boost as a visit from Santa or Scrooge.
They had been wondering where the money would come from to pay for infrastructure projects, especially Perth’s Metronet, promised by State Labor during the last election campaign. Now they know. Well, most of it. A couple of billion dollars more will be needed to fund the projects.
Western Australians were expecting 45 cents back for every dollar in GST raised in the state (up from 34c) and they were told they would in fact get 47c. But Victorians will get A$1.8 billion more in funding, and 98c in the dollar back from their GST.
Many people in the West will be wondering whether another A$10 a week in their pocket is all that much, especially given Perth’s notorious coffee prices.
In a pre-election budget, and in a state in which the Liberal vote is falling, the Santa or Scrooge question is important – and the answer is still not really clear.
Chris Salisbury, Research Associate, University of Queensland
As expected, Scott Morrison’s third federal budget is big on pleasure and light on pain for Queenslanders. With a federal election due within a year, and given Queensland’s status as a battleground state, the temptation to splash the cash in the Sunshine State is strong.
Committing almost A$536 million (A$478 million of it new) over five years to improve the health of the Great Barrier Reef has been welcomed widely, although criticised in some conservation circles for supporting programs that don’t directly address the impacts of climate change.
The biggest smiles are reserved for proponents of infrastructure spending, especially to relieve commuter congestion, with A$5.2 billion newly earmarked for projects in Queensland.
This includes a A$1 billion boost for expanding the M1 motorway between Brisbane and the Gold Coast, A$170 million for the Amberley interchange section of the Cunningham Highway near Ipswich, and A$3.3 billion for much-needed upgrades to the Bruce Highway. There is also A$390 millon for the Sunshine Coast rail line duplication, a project that has long been advocated by local Liberal National Party MPs.
Significantly, but not surprisingly, there is no federal funding for the Cross River Rail project in Brisbane, a longstanding bone of contention between the Labor state government and the federal Coalition. Instead, Morrison has pledged A$300 million for the LNP-controlled Brisbane City Council’s Metro transport project.
Regional Queensland hasn’t been ignored, with A$176 million promised for the long-
proposed construction of Rockhampton’s Rookwood Weir, dependent on equivalent
state funding. Federal Nationals MPs hope this will boost Coalition support in marginal central Queensland seats, where the popularity of One Nation looms large.
Rolf Gerritsen, Professorial Research Fellow, Northern Institute, Charles Darwin University
The federal budget’s impact in the Northern Territory was determined before the territory’s own budget was released last week.
Two days before the NT budget came out, Treasurer Scott Morrison gave the territory a A$259 million top-up to compensate for its reduced GST revenue share. (A sweetener, perhaps, for approving fracking?).
Morrison also promised a A$550 million contribution to the territory’s indigenous housing budget. The Country Liberal Party candidate for the Labor seat of Lingiari also announced A$250 million to extend the indigenous Ranger program. And the NT received $280 million in roads funding, as well.
The NT has three problems in coming years. Its public service expenditure is overly large and top-heavy, meaning its cost is rising faster than inflation. Secondly, its population is growing relatively slowly compared with the rest of Australia. Finally, the territory’s Aboriginal population is decreasing as a proportion of the national Indigenous population, as more people in cities on the east coast have begun identifying as Indigenous in recent censuses.
These factors affect the territory’s relativities as calculated by the Commonwealth Grants Commission. The NT’s relativities have declined from 5.4% to 4.6% in the coming year. This means the NT received A$540 million less in its general purpose grant than if the 2010 relativities settings were still in place.
That will likely only get worse as the territory’s debt burden is expected to become intolerable within two decades.
Rob Manwaring, Senior Lecturer, Politics and Public Policy, Flinders University
The twin focus of the 2018 budget was tax relief and a strong focus on support for older people.
This will have a mixed impact on South Australia. SA has a disproportionately older population compared with the rest of the country. In theory, the state should then benefit from a range of Scott Morrison’s measures to increase aged care places and support for in-home care.
The tax relief measures might also well offer some respite to residents, given concerns about cost-of-living prices.
Yet, the budget does little to directly tackle economic inequality in the state. SA has the highest youth unemployment in the nation. The lack of an increase to the state’s Newstart allowance will not help young people out of work. The treasurer also didn’t flag any specific measures to tackle other youth issues, including pathways into the housing market. Nor are there specific stimulus job measures, meaning any positive job growth effects might well take some time to kick in.
For Steven Marshall’s freshly minted Liberal government, however, there are opportunities in the budget, especially the 21st Century medical plan, which aligns well with his rejuvenation agenda to create medical precincts.
The government will also receive money to fund specific infrastructure measures, such as the North-South roads corridor. Whether this spending is proportionate to SA’s size and needs, however, remains unclear. The Marshall government will still likely need to be proactive to bring additional funding to the state for other infrastructure projects, such as solving traffic hot spots in Adelaide.
Maria Yanotti, Lecturer of Economics and Finance Tasmanian School of Business & Economics, University of Tasmania
Cuts to GST revenue and personal income tax will have the biggest impact for Tasmanians. Changes to the GST carve-up could deliver a A$29 million drop in state government revenue, which will restrict state expenditure as GST payments account for 40% of the state’s budget.
Conversely, the cut to personal income tax will mean more disposable income for many in Tasmania, where annual average earnings are A$53,357, but the median annual income is just A$29,796.
The measures to improve longer life choices for older Australians, as well as the fully funded roll-out of the National Disability Insurance Scheme, will also be welcomed in Tasmania. People aged 65 years and over represent almost 20% of the state’s population, the aged care residential services industry employs 2.8% of Tasmanians (relative to 2% of all Australians), and the health care and social assistance sector is the state’s biggest employer.
Investment in infrastructure, defence equipment, space industry, and research and development are arguably the way to go into the future. Most Tasmanians will support the Great Barrier Reef package and some will indirectly benefit from the Melbourne airport train link. However, the federal budget is again offering little that’s truly new for Tasmania, with most of the funding going to pre-existing commitments.
Investment in agricultural competitiveness and access to export markets, accompanied by cuts in business taxes and business support, will stimulate growth of businesses in an economy that receives a large share of Commonwealth income. Meanwhile, levelling the playing field for small business will benefit many emerging boutique businesses in the state.
Tasmania’s population, tourism industry, private businesses and economy have all been growing, which is always good for the incumbent government. Launceston and Hobart are progressing with “City Deals”, and the University of Tasmania is “transforming”. However, this progress has been accompanied by strong house price growth and housing pressure, while educational levels are still low.
In our budget policy checks we look at the government’s justifications for policies in the budget and measure them against the evidence.
In this piece we look at Treasurer Scott Morrison’s speech.
Treasurer Scott Morrison has laid out his budget plan to further strengthen Australia’s economy, with a focus on constraining both spending and taxing.
As a Government we have put constraints on how much we spend and how much we tax, to grow our economy and responsibly repair the budget.
Real expenditure growth remains below 2%, the most restrained of any government in more than 50 years… We are also keeping taxes under our policy speed limit of 23.9% of GDP set out in our fiscal strategy.
Higher taxes to chase higher spending never ends well. Australians always end up paying for it one way or another.
Economist and tax expert John Freebairn says capping tax revenue is an arbitrary measure that overlooks the many potential reforms to the tax system that are revenue-neutral.
And, says Freebairn, the wide range in tax-to-GDP ratios around the world – from the United States at 25.9% to Denmark at 49.6% – shows that there is no one answer.
Identifying the right level to tax is obviously contentious, but an evidence-based approach would ensure that tax is at a point where the benefit to society of additional government spending no longer exceeds the distortion cost of raising the extra tax.
Tax relief is the biggest budget expense, costing the government A$13.4 billion over the forward estimates. This includes an immediate (albeit small) tax offset for all taxpayers, and for low- to middle-income earners, an increase in the upper threshold for three tax brackets.
Everyone pays the price of higher taxes. It weakens the economy and costs jobs.
And, he says, targeted personal income tax cuts, not funded by bigger deficits, could reduce the squeeze on households and make up for persistent low wages. The move will likely provide much more of a boost to the Australian economy than cutting company income tax.
Meanwhile, households are being promised good news about their electricity bills.
The National Energy Security Board estimates annual power bills will fall by A$400 on average for every Australian household from 2020, following the introduction of our national energy guarantee.
The government continues to argue the case for a conservative emissions reduction and renewable energy targets to prevent against higher electricity prices.
We will maintain our responsible and achievable emissions reduction target at 26-28%, and not the 45% demanded by the Opposition. That would only push electricity prices up.
And we will not adopt the 50% renewable energy target demanded by the Opposition that will also only put electricity prices up.
All energy sources and technologies should support themselves without taxpayer subsidies. The current subsidy scheme will be phased out from 2020.
Energy experts say increasing levels of renewable energy generation are just one of the many factors affecting retail electricity prices. Other factors include network costs, gas prices, changes in supply and demand dynamics and market competition issues.
Energy researcher Dylan McConnell says the assertion that high electricity prices are the consequence of renewable energy policies is incorrect.
The fifth pillar of Morrison’s budget plan is “ensuring that the government lives within its means”.
This is code for a continued crackdown on welfare cheats, but also includes ratcheting back research and development tax incentives, squeezing more tax out of multinationals, and finding a way to get revenue from the black economy.
A stronger economy keeps spending under control by getting Australians off welfare and into work. After record jobs growth, the proportion of working age Australians now dependent on welfare has fallen to 15.1% – the lowest level in over 25 years.
It wasn’t a big budget for education this year, with schools funding already set in the last Budget, and the funding freeze for universities announced in the Federal Government’s mid-year budget update in December.
But the National Schools Chaplaincy program will become permanent, with A$247 million set aside over four years from 2018-19.
And there is some good news for students in regional, rural and remote areas, with:
A$96.1 million over four years for young people in regional, rural and remote communities to transition to further education, training and employment
A$14 million over four years for 185 Commonwealth Supported Places annually for students commencing a bachelor degree at university through a Regional Study Hub
A$53.9 million over four years to improve regional students’ access to youth allowance, and
A$123.6 million over five years to regional universities for additional Commonwealth Supported Places from 2017-18.
Schools and early education funding
Glenn Savage, Senior Lecturer in Education Policy and Sociology of Education at University of Western Australia
Despite ongoing political debates about school funding, most of the big news happened in last year’s budget, when the federal government formalised details associated with its Quality Schools reform package.
The package centres on a commitment to align school funding with the Schooling Resource Standard (SRS) recommended in the 2011 Gonski report into school funding.
To achieve this, the government plans to progressively raise funding levels for government schools from 17% to 20% of the SRS and for private schools from 76.8% to 80% of the SRS by 2027.
The government argues that this delivers an additional $24.5 billion for Australian schools over the decade, and says it will be up to states as to whether they wish to fund the remaining amounts so that all schools reach the full SRS.
The government also claims its reform package provides more consistent needs-based funding when compared to the so-called “special deals” established under the Labor Gillard government.
Labor doesn’t agree, suggesting the Coalition is shortchanging the nation to the tune of A$17 billion (the initial claim was $22 billion) when compared to promises made by the former Gillard Labor government.
Labor has promised, if re-elected, to return to the Gillard model.
This ensures funding will be a defining issue at the next federal election, especially given last week’s Gonski 2.0 report has made a suite of recommendations that the federal government supports and could very well require an additional injection of federal funds to implement.
But any potential changes hinge on whether the Coalition is actually in power when next year’s budget is delivered. And, if so, whether it has any luck pursuing the new Gonski agenda with states and territories.
Aside from these ongoing Gonski wars, this year’s budget contains a few additional highlights.
• A$11.8 million over three years to expand the Early Learning Languages Australia program to more preschools and trial the program in 2019 and 2020 from the first year of school through to year two in primary schools.
• A$6 million over two years (from 2017-18) to continue and update the communications campaign to increase public awareness of changes to the Quality Schools package (aka public relations to sell the government’s reform package).
• A$1.3 million per year until 2020-21 to continued funding the MoneySmart Teaching program, designed to improve financial literacy education in schools.
Finally, the government has signalled its intention to continue exploring ways to deliver new and diverse pathways into the teaching profession, with the view to increasing the supply of quality teachers. This measure builds on previous work associated with the Teach for Australia program.
To pursue this aim, the government has suggested it will invite proposals in 2018 from providers to deliver alternative pathways into teaching.
Higher education and VET funding
Andrew Norton, Program Director of Higher Education at Grattan Institute
The long aftermath of the VET FEE-HELP loan fiasco is still being felt in the 2018-19 Budget. The government is planning to spend A$36.2M over fours years for a new IT system to ensure compliance in the replacement VET Student Loans program.
The VET Student Loans Ombudsman, given the task of receiving student complaints about vocational education lending, is to receive another A$1 million to help deal with the large numbers of people making complaints.
Higher education’s big Budget news came early, in the December 2017 Mid-Year Economic and Fiscal Outlook (MYEFO). It announced a two-year pause in tuition subsidy growth, and a range of reforms to the Higher Education Loan Program (HELP). There is no major change to these decisions in the 2018-19 Budget.
The pause in tuition subsidy growth has been implemented. It was done without going back to parliament using university funding agreements. For domestic bachelor degree places, universities will receive the same total amount that they received for 2017 for each of 2018 and 2019. Previously, there were “demand driven”, meaning that the Government would fund every student the universities enrolled.
The government has also used the funding agreements to reduce the number of Commonwealth-funded diploma, associate degree, and postgraduate coursework places. About 4,000 allocated places were abolished, but some of these weren’t being used anyway, so the practical effect may be limited.
Soon after these policies were announced, partial exceptions began with the University of Tasmania, the University of the Sunshine Coast and Southern Cross University all receiving additional places. These are confirmed in the Budget at a cost of A$124 million over five years.
Including the new places, funding on Commonwealth contributions through the Commonwealth Grant Scheme will be just over A$7 billion for 2018-2019.
From 2020, the government says it will resume funding increases based on population growth for universities that meet yet-to-be determined performance criteria. The Budget paper shows predicted spending of A$7.3 billion in 2020-21.
But numbers this far out are moot. With an election due in the next 12 months, and Labor indicating it will go back to demand driven funding, the funding freeze could be over by then. If the Coalition survives in office, it may also make substantial changes.
The other major MYEFO announcement was to the Higher Education Loan Program (HELP) loan scheme. Unlike changes to total tuition subsidy payments, these need legislating and the relevant bill is still before the Senate.
The most important proposed changes to HELP are the income thresholds determining whether, or how much, a HELP debtor needs to repay each year. If it passes, the bill would lower the initial repayment threshold from A$52,000 a year to A$45,000 a year. HELP debtors earning between A$45,000 and A$52,000 would repay 1% of their income. But some other thresholds are more generous than now, and many HELP debtors would end up paying less per year than they do now.
The government also originally proposed a A$100,000 lifetime cap on borrowing under HELP for all courses except medicine, dentistry and veterinary science, rather than just the full-fee student FEE-HELP scheme. The Budget confirms that the cap would be A$100,000 of HELP debt at any one time, allowing people who have paid off some debt to borrow again.
Whether HELP reforms eventually pass the Senate remains to be seen. In either case, it is fortunate for the higher education sector that they were not rejected prior to the May 2018 Budget. The freezing of the demand driven system showed the government was not bluffing when it said it needed to reduce higher education spending. Like the demand driven system, equity programs and some research programs are vulnerable to cuts the parliament cannot easily stop.
As it turns out, these programs survive in the Budget.
Research funding will receive a modest boost, with nearly A$400 million extra over five years for research infrastructure.
Although the higher education sector gets off lightly in the Budget compared to MYEFO, higher education providers will be hit with extra charges. The Government plans to charge them more for the services of the Tertiary Education Quality and Standards Agency.
The government also plans to charge higher education providers A$10 million a year to recover costs associated with HELP. We can only hope some of this is used to improve on the current very unsatisfactory public reporting of HELP’s finances.
Treasurer Scott Morrison has unveiled an income tax plan that will cost $140 billion over a decade and initially deliver tax relief of $530 a year for 4.4 million people earning between $48,000 and $90,000.
The three part plan is the centrepiece of Tuesday night’s budget, which also brings forward by a year the forecast return to surplus and the peak of Australia’s net debt.
The tax plan will be part of the government’s pitch for the election, due early next year, with Labor putting up a competing proposal.
The government also hopes that its income tax changes will soften Senate resistance to its legislation to cut the company tax rate for large companies. Morrison stressed that people on low to middle incomes would get a tax cut before big business.
Under the plan, the government says that 94% of taxpayers in 2024-25 will face a marginal rate of 32.5% or less. That compares with 63% if the system was unchanged.
Morrison said that in the first step, there would be relief for lower and middle income earners. The second step would protect taxpayers from bracket creep, while the third step would make the income tax system simpler and flatter.
Targeted relief will be given via an additional tax offset, paid when taxpayers receive their assessment, so that it is directed to lower and middle income earners.
In 2024-25 the system will be simplified by abolishing the 37% tax bracket entirely.
“Australians earning more than $41,000 will only pay 32.5 cents in the dollar all the way up to the top marginal tax rate threshold which will be adjusted to $200,000,” Morrison said.
“Under the Turnbull government’s personal tax plan most working Australians earning above $41,000 are likely to never face a higher marginal tax rate throughout their entire working life.” he said.
Morrison said the plan was “affordable”. The revenue impact over the forward estimates is $13.4 billion. The cost over a decade is $140 billion.
The budget forecasts a deficit for the current financial year of $18.2 billion, which Morrison said would be the best budget outcome since the Howard government’s last budget a decade ago.
The deficit is forecast to be $14.5 billion in 2018-19 before returning to balance with a wafer thin $2.2 billion surplus in 2019-20. Previously the budget had been predicted to return to a surplus in 2020-21. Over the medium term the surplus is predicted to rise to more than 1% of GDP.
Net debt will also peak earlier than predicted, at 18.6% of GDP in 2017-18, falling by about $30 billion over the forward estimates. Morrison told a news conference in the budget lock up “we have reached a turning point on debt”.
Morrison said in his budget speech: “The Australian economy is now pulling out of one of the toughest periods we have faced in generations.”
The economy is forecast to grow by 3% in 2018-19, with unemployment at 5.25% compared with 5.5% in this financial year. But the budget forecasts a slowing in what has been the surging growth in employment – from 2.75% in 2017-18 to 1.5% in 2018-19.
Real spending growth in the budget has been kept below 2%, which Morrison said was “the most restrained of any government in more than 50 years”. He emphasised that the government was “keeping taxes under our policy speed limit of 23.9% GDP”.
The main initiative on the spending side is a package for older Australians including an additional 14,000 high level home care places costing $1.6 billion over four years. There will also be extra money for aged care services in regional Australia and increased support for mental health services in aged care facilities.
The government is hoping to boost retirement incomes by making it easier for people to find their lost superannuation, and by abolishing exit fees. It will also crackdown on expensive insurance policies being sold to younger people.
The budget foreshadows raising $5.3 billion over the next four years from a crackdown on the black economy, including combatting “chop chop” tobacco.
The budget was welcomed by business and attacked by Labor and the ACTU.
The opposition said the budget failed both the fairness test and the fiscal test.
Shadow treasurer Chris Bowen and finance spokesman Jim Chalmers said Labor would back the income tax measures that started on July 1 while having more to say later about how else Labor would help working people.
But they said that most of the tax package was “off in the never never – it’s a hoax for Mr Turnbull to tell people they have to vote for him at least two more times before they get tax relief in 2024”.
“Funding just 14,000 new in-home aged care packages over four years is another hoax, with funding being cut from residential aged care to pay for it,” they said in a statement.
Bowen told the ABC Labor would have budget repair as a central element of what it proposed. He also said the ALP would return the budget to surplus in the same year as the government.
The Business Council of Australia said this was “a strong and sensible budget focussed on growth and built overwhelmingly on the contribution of the business community”. The Australian Industry Group said it would “give business and the community confidence for the future”.
But the ACTU said the government “has chosen to do the bidding of big business, offshore investors and the already wealthy, and neglect the needs of working people”. The budget relied “on failed trickle-down economics to trick Australians into giving a failed Government another term in power”.
The Brotherhood of St Laurence said “the long forgotten people of this federal Budget – yet again – are Australians who rely on Newstart to make ends meet”.
The Institute of Public Affairs was scathing, saying the tax cuts were too timid and too slow.
“The so-called ‘tax speed limit’ is a smokescreen to hide the fact that this is the highest taxing, highest spending, and highest debt Budget in Australia’s history,” the IPA said.
The Greens said the budget showed that “large corporations and the super-rich have rigged the rules for themselves”.
“Under the Government’s radical US-style tax plan, a hedge fund manager on $200,000 gets 10 times the tax cut as the person who trims the hedges around his mansion.”
What a difference a year makes in budgetary politics. More to the point, what a difference the availability of better-than-anticipated tax receipts makes in framing an electioneering budget.
Burgeoning tax revenues – for now – have enabled Treasurer Scott Morrison to bring down a budget that will put the government in a better position to fight the next election than otherwise might have been the case.
This is a budget that, on the face of it, more or less accords with conservative principles of fiscal restraint and a commitment to reduce the tax burden.
This would not have been possible without a surge in government receipts. In that respect, the government has been lucky.
What Morrison has put together in this, his third budget, is the outline of a policy manifesto for the next election across a range of government activities, including its response to escalating energy prices, infrastructure bottlenecks and cost-of-living pressures.
Coalition members of parliament, including a conservative rump, should not be displeased with a document that will provide a reasonable platform for polls due by mid-2019.
In their pre-budget deliberations, Morrison and fellow members of the Expenditure Review Committee will have obsessed about four basic questions in framing the 2018-19 document.
The first is how to shore up support in the Coalition’s heartland seats to create a political Maginot line against an aggressive Labor challenge. The second is how to distribute largesse from booming tax receipts in a way that avoids criticism of fiscal irresponsibility. The third is how credible are the Treasurer’s claims of charting a course back to a budget surplus a year earlier than anticipated to enable paying down debt. And finally, how to differentiate the Coalition from Labor across a suite policies because in the end, elections are about product differentiation.
For the government, the question will be whether Morrison’s budgetary measures, including a redrawing of the tax scales, increased assistance to seniors, and a boost to infrastructure spending will prompt jaded voters to give the Coalition another look.
Can people be persuaded to look more critically at what Labor will have on offer, bearing in mind that it has already announced measures on cash-back franking credits, negative gearing and capital gains that will provide scope for it to match – or better – the Coalition’s tax cuts?
Those Coalition representatives sitting behind Morrison on the Treasury benches will be encouraged – not necessarily convinced – by his budget offerings.
A budget poll bounce may materialise, but it is hard to see the budget changing the political calculus in and of itself, in which Labor has maintained an advantage since the knife-edge election of 2016 .
In 2016, the Coalition prevailed by just one seat. This means that the forthcoming election, there is virtually no margin for error.
Tax reform stands as the centrepiece of this Morrison budget, with an immediate reduction in taxes for lower and middle-income earners, and a long overdue simplification of the tax scales over time.
Coalition supporters will be pleased a start has been made on more comprehensive tax reform in place of piecemeal measures adopted in recent times.
Whether lower and middle income taxpayers regard average tax reductions of $10 a week sufficient remains to be seen.
On the other hand, this is a budget that will provide challenges for Labor in framing a narrative that questions the government’s commitment to fairness in the allocation of resources.
In his press conference before his statement to parliament, Morrison was at pains to emphasise the budget’s “fairness”.
This is how a government – under pressure over perceptions it is indifferent to the challenges facing middle Australia – hopes the 2018 budget will be received.
Memories of an austerity 2014 budget, brought down by then Treasurer Joe Hockey and widely regarded as lacking fairness, have lingered.
In his three budgets, Morrison has steadily sought to reverse the negative impact of that 2014 budget on middle and lower-income earners.
Thanks to improving tax revenues, he appears to have succeeded to a significant extent in erasing lingering fallout.
What is striking about the 2018 budget is the marked difference in tone between what he had to say last year, and his relatively upbeat view of the way ahead this year.
In 2017, he reminded us that Australians had been obliged to “dig deep to keep the economy on track”, and he acknowledged “it’s been a fair while since hardworking Australians have had a decent pay rise”.
This year, he asserted the government had been making “real progress” in getting the budget “back on track”.
This includes a forecast return to a “modest surplus” in 2019-20, a year ahead of schedule, and projected surpluses of $11billion and $16.6 billion in 2020-21 and 2021-22.
He pledged that with the return to surplus, the government would begin paying down debt. He expects net debt to peak at 18.6% of GDP in 2017-18 and fall to 3.8% of GDP by 2028-29.
These projections could be said to be based on heroic assumptions about continued revenue growth over the next decade, and spending restraint. They need to be regarded sceptically.
A rejigging of the tax scales in favour of middle and lower income earners should help neutralise criticism the Coalition skews it policies towards higher income earners and the so-called “big end of town”.
Corporate tax cuts remain in the budget, but their passage against Senate opposition remains problematic.
Economist Chris Richardson gives Morrison credit for bringing down a budget that resisted the temptation to take advantage of a surge in tax receipts to splurge on election giveaways:
We had a dangerous combination of higher-than-anticipated tax receipts and a pending election, but despite this the Treasurer has been relatively restrained.
Richardson noted the budget was “tightly focused” on middle Australia, where the forthcoming election will be won and lost.
Economist Saul Eslake agrees that despite the “biggest movement” in revenues since the global financial crisis the government had been “reasonably prudent” in formulating an election-year budget.
Whether a public, which is seeing electricity prices going through the roof, and wage increase stuck in low gear, sees it this way remains to be seen.
However, Morrison has done a serviceable job with a budget that needed to be both prudent and relatively appealing. This budget will define the political narrative for the forthcoming election. Battle is joined.
History, finally, caught up with Labor in South Australia. After 16 years in office, and seeking a record fifth term, Jay Weatherill’s Labor has conceded to the Liberals.
While the results have not been finalised, the current state of play has Steven Marshall’s Liberals securing a majority. In the projected seat tally, the Liberals have won 24, Labor 18, Independents three and two seats remain undecided. This is a remarkable and unexpected result for a range of reasons.
So, as we still pick over the results, what seemed to go right for the Liberals and so wrong for Nick Xenophon’s SA-Best team?
For the Liberals, while this was a win, it was not as resounding as, say, Mike Rann’s 2006 “Rann-slide”. Yet, it has been a result a long time coming, having won the popular vote in three of the past four state elections. Marshall’s campaign centred on him being a “safe” change-agent.
Marshall’s success lies in a range of incremental factors. First, he put to bed the historic divisions in the party. In a striking insight, he followed John Howard’s advice not to have votes at shadow cabinet meetings, but decide by consensus. New leadership, coupled with the misery of the long years in the wilderness, helped cement party unity.
Second, Marshall’s policy agenda has remained consistent and undramatic. When he launched his first 100 days in office, this was a smart relaunch of policies already well-known. It might have lacked a “wow” factor, but this has proven to be an asset. South Australians will now see cuts to household bills, a roll-out of a home battery scheme, and a push to deregulate working hours.
Third, the Liberals finally managed to make the most of the ammunition of Labor’s 16 years in office, especially the release of the Oakden report into abuse at the state-run mental health facility. The Liberals capitalised on this with a powerful campaign ad by the son of one of the victims, saying he “had enough” of Labor.
Yet, the story of the night was the deflation of the Xenophon SA-Best threat to the major parties. SA-Best looks set to secure just 13.7% of the vote, much lower than even lowered expectations.
The Xenophon vote fail to carry through – arguably for the following reasons.
First, there was overreach by Xenophon, perhaps mistakenly buoyed by the December Newspoll that not only suggested his party could hoover up a third of the vote, but also dangling the prospect of Xenophon as future premier.
Running 36 SA-Best candidates proved a stretch too far for South Australian voters.
Second, the SA-Best machine seemed ill-equipped and under-prepared for the campaign. Policy announcements came late in the campaign, giving the veneer of “policy on the run”.
In other key seats, some untested SA-Best candidates met difficult challenges. In Colton, Matt Cowdrey, the Liberal candidate and former paralympian, easily saw off the SA-Best candidate. In Mawson – a key SA-Best target, Leon Bignell the Labor (now former) minister ran a strong campaign to damage Xenophon hopes.
The thinness of the SA-Best “machine” might prove a factor, as candidates were recruited late in the piece, and some did not seem quite ready for the media scrutiny, nor have enough time to embed themselves as the SA-Best candidate in their seats.
Voters also seem to have pulled back from the unclear positioning of SA-Best. After the initial honeymoon, SA-Best shifted from its traditional “watchdog” role – previously held by the Democrats – to presenting as a “kingmaker”. This brought additional scrutiny and expectation, pushing Xenophon onto the back foot.
In the final weeks of the campaign, Xenophon was playing to his familiar strength, gambling reform, but voters expected a more embracing policy agenda.
Finally, the Australian political system is undergoing change, but the institutional factors continue to suppress minor party challengers. The lower house, with its majoritarian electoral system, requires a strong performance by the next best-placed challenger. Three-into-two does not easily go.
It is notable too, that the election did not go as planned for other parties. The Australian Conservatives clearly failed to capitalise on their merger with Family First, with a drop in its vote share to 3.1%.
For Labor, the result is far from a disaster, and offers them the chance to rebuild, perhaps with a new leader in Peter Malinauskas.
Critically, Australian democracy seems more accelerated, with Liberal governments in Victoria and Queensland ejected after just one term. Marshall will need to move quickly to ensure his new government does not follow this new trend.
With 66% of enrolled voters counted in Saturday’s South Australian election, the ABC is calling 24 of the 47 lower house seats for the Liberals, 18 for Labor and three independents. Two seats – Adelaide and Mawson – are in doubt. Pre-poll, postal and absent votes will not start to be counted until Tuesday.
While the Liberals won the election, the biggest losers were Nick Xenophon and his SA-BEST party. SA-BEST does not appear to have won a single lower house seat, while the Liberals crushed Xenophon in Hartley 58.6-41.4. When preferences are distributed, Labor could eliminate Xenophon from the final two candidates on Greens’ preferences.
Statewide primary votes were 37.4% Liberals (down 7.4% since the 2014 election), 33.9% Labor (down 1.9%), 13.7% SA-BEST, 6.6% Greens (down 2.1%) and 3.1% Australian Conservatives (down 3.0% from Family First’s 2014 vote). When counting is complete, I would expect Labor to fall somewhat, with the Liberals and Greens gaining.
Family First merged into the Conservatives last year, but this was not successful in South Australia. In my opinion, Family First had a catchier name than the Australian Conservatives.
In an October-to-December Newspoll, SA-BEST had 32% of the South Australian primary vote, and it was plausible that Xenophon could be the next premier. In the lead-up to the election, Xenophon was attacked by all sides. I believe the biggest reason for Xenophon’s flop was that he lacked a clear agenda to distinguish his party from the major parties.
Labor had governed South Australia for 16 years, and the “it’s time” factor appears to have contributed to the result. But this election was not the disaster Labor suffered after 14 to 16 years in power in Queensland, New South Wales and Tasmania at elections between 2011 and 2014.
According to the Poll Bludger, Labor achieved about a two-point swing in its favour in two-party terms from the 2014 election, but it needed a three-point swing to win after a hostile redistribution. In 2014, Labor clung to power, despite losing the two-party vote 53.0-47.0.
In the upper house, half of the 22 members were up for election using statewide proportional representation. With 11 to be elected, a quota is one-twelfth of the vote, or 8.3%. Currently, the Liberals have 3.78 quotas, Labor 3.56, SA-BEST 2.27, the Greens 0.72 and the Conservatives 0.42.
Optional above-the-line preferential voting was used at this election. The Liberals will win four seats, Labor three, SA-BEST two and the Greens one. Labor is currently well ahead of the Conservatives in the race for the last seat, but Labor’s vote will probably drop after election day. However, preferences from Dignity, Animal Justice and SA-BEST should help Labor against the Conservatives, with only Liberal Democrats’ preferences likely to flow the other way.
If Labor wins a fourth upper house seat, SA-BEST’s two seats would come at the expense of Dignity and the Conservatives. The overall upper house would then be eight Liberals, eight Labor, two Greens, two SA-BEST, one Advance SA (formerly SA-BEST) and one Conservative. The Liberals would need all of SA-BEST, Advance SA and Conservative to pass legislation opposed by Labor and the Greens.
The final polls for the South Australian election, from Newspoll and ReachTEL, gave the Liberals 34%, Labor 31% and SA-BEST 16-17%. The major parties, particularly the Liberals, performed better than expected, while SA-BEST performed worse.
Labor defeats the Greens 54.1-45.9 at the Batman byelection
With 74.5% of enrolled voters counted at Saturday’s Batman byelection, Labor’s Ged Kearney defeated the Greens’ Alex Bhathal by a 54.1-45.9 margin, a 3.1% swing to Labor since the 2016 election. Primary votes were 42.7% Kearney (up 7.4%), 40.3% Bhathal (up 4.1%), 6.4% Conservatives and 2.9% Animal Justice. The Liberals won 19.9% at the 2016 election, but did not contest the byelection.
In the Northcote West booth, Labor and the Greens’ two-party results are the wrong way round. The correction of this error will push Labor’s overall margin down to 53.8-46.2, but postals counted so far have strongly favoured Labor.
At byelections, there are no Greens-favouring absent votes, so Labor’s lead is likely to increase as more postals are counted.
Labor received large swings in its favour in the southern part of Batman, the more Greens-favouring part. Kearney was a far better fit for this part of the electorate than the right-aligned David Feeney. It is also possible there was a backlash against the Greens for courting Liberal votes over opposition to Labor’s plan to alter the tax treatment of franking credits.
For Bill Shorten and federal Labor, the Batman result will be a huge relief. If Labor had lost Batman, the media would have seen it as a backlash against Labor’s tax plan.
While Labor lost the South Australian election, it was not a disaster. Federal parties generally do better in states where the opposite party is in power, so Labor could do very well in South Australia at the next federal election.